TAIPEI (Reuters) - Lai Ching-te takes office as Taiwan's new president on Monday facing an angry and deeply suspicious China which believes he is a "separatist", and a fractious parliament with an opposition chomping at the bit to challenge him.

Lai will express goodwill towards China in his inauguration speech at the Japanese-colonial era presidential office in central Taipei, and call for both sides of the Taiwan Strait to pursue peace, according to a senior official briefed on the matter.

Beijing views proudly democratic Taiwan as its own territory, and has never renounced the use of force to bring the island under its control. Lai has offered talks, which have been rebuffed, and says only Taiwan's people can decide their future.

Taiwan has faced on-going pressure from China, including regular air force and navy activities close to the island, since January's election victory by Lai, who is 64 and widely known by his English name William.

In attendance at the ceremony will be former U.S. officials dispatched by President Joe Biden, lawmakers from countries including Japan, Germany and Canada, and leaders from some of the 12 countries which still maintain formal diplomatic ties with Taiwan, like Paraguay President Santiago Pena.

Last week, China's Taiwan Affairs Office said Lai, who it called the "Taiwan region's new leader" had to make a clear choice between peaceful development or confrontation.

His domestic challenges loom large too, given his Democratic Progressive Party (DPP) lost its parliamentary majority in the January election.

On Friday, lawmakers punched, shoved and screamed at each other in a bitter dispute over parliamentary reforms the opposition is pushing. There could be more fighting on Tuesday when lawmakers resume their discussions.

(Reporting by Ben Blanchard; Editing by Lincoln Feast and Peter Graff)